Fact: Assembly Bill 5 (AB5) went into effect January 1, 2020 in California, and has real implications for the beauty service industry.
AB5 requires certain employers to classify and treat all workers, including independent contractors, as employees, however, certain occupations are exempt from AB 5 regulations, including hairdressers, manicurists, licensed barbers, and estheticians.
That said, even though hair salons are exempt, there are still other tests that dictate how employees are classified. Meet the Borello multi-factor test.
Why should you care?
It’s important that business owners not only familiarize themselves with these regulations, but also properly organize and manage the way they both classify and compensate their employees
When a worker passes the Borello 11-factor test and is classified as an Independent Contractor, the employer and employee agrees to the following:
The salon cannot have any say in how the services are performed
The renter/stylist must have their own license
The renter/stylist must carry their own insurance policy
The renter needs to collect the customer’s payments instead of having customers pay through a front register
The renter should carry their own supplies needed to perform their services
The rent may either be a fixed amount or may be a percentage of the renter’s sales.
How Boulevard Can Help
Let's say Salon X is a blended salon and employs a mix of independent contractors and employees. Per Borello regulations, clients must pay their service provider directly if they are independent contractors.
Enter Boulevard's Multi-Merchant Accounts functionality. Boulevard provides merchant IDs to all independent contractors, so when client pays, Boulevard automatically deposits funds into the professional’s merchant account according to the revenue generated.
Also at Salon X, contractors must also pay a fee to their employer for renting a chair.
Again, using Multi-Merchant Accounts, Boulevard provides merchant IDs to all independent contractors. And when a client pays, Boulevard automatically deposits funds into the professional’s merchant account.
Under Client Profiles: The employer simply adds the independent contractor as a client.
For Products: The employer adds a product for “Rental Fee” so they can charge contractors what they are owed.
Reports: Sales Summary report and payments and refunds report breaks out each merchant account.
Learn more about how Boulevard can help:
Client Profiles - to add an independent contractor as a client to charge them rental fees
Products & Inventory to add a rental fee product to charge independent contractors
Learn more about AB5:
New California Law Codifies - and Expands - Strict ABC Test for Independent Contractor Status
New California AB 5 Law Expands Independent Contractor ABC Test
FAQs:
How does the Borello 11-factor test impact the classification of workers in the beauty service industry, particularly those who are independent contractors?
The Borello 11-factor test plays a crucial role in determining the classification of workers in the beauty service industry, particularly those operating as independent contractors. It assesses various aspects of the working relationship between the employer and the worker, such as the level of control exerted by the salon over the services performed, the provision of licenses and insurance by the contractor, and the method of payment collection. Understanding how this test applies to their specific situation is essential for both salon owners and independent contractors to ensure compliance with labor regulations.
What are the specific implications and requirements for salon owners in California under Assembly Bill 5 (AB5), especially in relation to the classification and compensation of employees and independent contractors?
Assembly Bill 5 (AB5) in California significantly impacts the beauty service industry by mandating certain employers to treat workers, including independent contractors, as employees. However, specific occupations like hairdressers, manicurists, licensed barbers, and estheticians are exempt from some AB5 regulations. Yet, there are still other criteria, like the Borello multi-factor test, that determine how workers are classified. Salon owners need to navigate these regulations meticulously to classify and compensate their employees correctly, ensuring compliance with the law and avoiding potential penalties.
Can Boulevard's Multi-Merchant Accounts fully address the complexities and nuances of AB5 regulations for salon owners, particularly in terms of managing payments and rental fees for independent contractors?
Boulevard's Multi-Merchant Accounts offer a solution to the complex payment and rental fee management challenges faced by salon owners under AB5 regulations. By providing separate merchant IDs to independent contractors, Boulevard streamlines payment processes, ensuring that clients pay service providers directly. Additionally, features like Client Profiles and Products & Inventory facilitate the tracking and charging of rental fees to contractors. However, while Boulevard's system addresses key aspects of AB5 compliance, salon owners should still seek comprehensive understanding and legal advice to ensure full adherence to the law's requirements.